Weak Sales Force Cuts at Modavi

Published 7:00 pm, Wednesday, March 26, 2003

Robert Mondavi Corp. expects to report a loss for the January-March quarter because of weak sales and low wine prices.

The company also will lay off about 90 employees, mostly in the company's Napa County headquarters, said company chairman Michael Mondavi.

The anticipated loss, estimated between $1 million and $1.5 million, would be only the third quarterly loss for Mondavi since the company went public in July 1993.

After the warning, released following the close of trading Wednesday, Mondavi's shares plunged $1.34, or nearly 6 percent, to close at $21.63 Thursday on the Nasdaq Stock Market.

The Mondavi announcement comes as California wineries are fighting a grape surplus as well as tough foreign competition and a flagging U.S. economy.

The Wine Institute reported Tuesday that overall California shipments increased 3 percent last year, but analysts said some wineries are struggling.

In previous recessions, Mondavi sales went up as customers went back to trusted brands, Michael Mondavi said.

But now the market offers improved imports selling for $5 to $10 a bottle, and that's hurting Mondavi sales. In particular, Mondavi cited the Australian brands Yellow Tail and Rosemount, which compete with Mondavi brands like Woodbridge.

Mondavi said March sales appear better than the first two months of the year, but it is too early to make a firm prediction. Final numbers will be released April 24.

Now Playing:

The expected loss, which could be from 5 cents to 10 cents a share, will bring down earnings for fiscal 2003 to about $15 million or $16 million. That is in spite of the gain of 24 cents per share made from sale of some Mondavi assets, including La Famiglia Winery.